Wednesday, August 12, 2009

Unemployment in Europe – Two sides of the same coin

I was in continental Europe for a few weeks last month and the situation as far as the economic crisis is concerned felt different that it does here in the US. The main concern that I saw was the risk of unemployment vs. unemployment itself – as there have been fewer layoffs over there than in the US. The fear of unemployment is understandable, mostly among those who are little skilled and/or depend on their paychecks to just go by. But I have felt that in Europe a far broader section of the population is concerned, the prevailing thought being, “if I lose my job, it is going to be nearly impossible to find another one”.

I think there is definitely awareness that the existence of a solid safety net has contributed to making the labor market more and more rigid, leading folks who have a job to generally stick to it even when their level of satisfaction is low and discouraging a lot of companies, especially smaller ones, to create new jobs as not only do they have to pay high social charges but also – and more importantly – they know that they have little leeway as to eliminating positions even when a downturn occurs.

The high level of rigidity of the job market and the comforting safety are the two sides of the same coin, but not until my last trip did I notice how inherently rigid the labor market has become, at least in most people’s eyes, resulting in a sharp increase in pessimism about the immediate future.

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